American Debt Crisis: Donkey Elephants Fight, Earth People Are Injured.

The global debt is now $44 trillion and 700 billion, which is equivalent to $6385 per person on earth. Of all the liabilities, the United States is the largest. It has borrowed half of the global debt from two countries in Japan.

In the last 48 hours, the US debt problem really took a turn.

At 8:40 pm on July 31, 2011, President Obama finally announced in a televised speech that "the leaders of the two parties have reached an agreement to reduce the deficit and avoid default."

In August 1st, the agreement was voted by the house of Representatives and the house of Representatives. The agreement includes a deficit reduction of US $2 trillion and 500 billion in 10 years and an increase of US $2 trillion and 100 billion in debt ceiling.

Global financial markets and central bankers relaxed, Asian stock markets slashed on Monday, but the Nikkei 225 index still rose 1.4%. European stock market opened about 1% on Monday, and the US stock index futures rose 1.3% before opening Monday.

The US dollar rose by about 1% against the yen and the US dollar against the Swiss franc. Crude oil futures rose 1.4% in New York, while gold fell nearly 1% from the highest point in history.

　 Raised debt ceiling

Xu Mingqi, deputy director of the Institute of world economics, Shanghai Academy of Social Sciences, told the Southern Weekend reporter: "last month, two officials of the United States Department of state agreed to visit Shanghai in advance, and talked to me about China." in 12th Five-Year, "planning problems" suddenly called to say that they did not come because the US government had no money, and the government had to cut costs and not come. Later, because of the adjustment of the temporary plan, the US government could borrow money from the pension fund, and after a while, the telephone came to say that it could come, and the government could operate again.

　　 It's all about debt.

US fiscal deficit The problem has continued to deteriorate in the last ten years. The arms spending in Iraq and Afghanistan, Bush's tax cuts and massive economic stimulus measures in the economic crisis have made the scale of public debt rising.

Because the federal government's income expenditure is not balanced, it is necessary to fill the gap through the form of debt. This debt is US Treasury bonds. According to American law, there is an upper limit on the size of government debt, that is, the amount of debt issued by the federal government can not exceed the legal limit.

This legislation began in 1917. But according to official statistics, the upper limit of government debt has gone through hundreds of rises.

The debt ceiling has been raised by only 2 trillion and 900 billion dollars in Obama's term alone. Last February, when Salvation When the economy is about to reach the limit of the size of the US debt, the Obama administration lobbied vigorously to push the US Congress to amend the bill, raising the government's debt ceiling from $12 trillion and 400 billion to $14 trillion and 300 billion.

Now, the debt ceiling that has already been raised is facing another problem.

According to the US Treasury Department, between August 2nd and August 31st, the US government had to pay up to $307 billion in maturity debt, but the current discretionary revenue was only $172 billion, and there was a financing gap of about $135 billion.

The cash situation is even worse. The US Treasury Secretary Geithner spent another 80 billion dollars before July 15th. The Treasury and the federal reserve cash together, before August 2nd, the remaining 39 billion, only tied with Google Corporation's book cash, less than Apple Corp.

And someone has made statistics that 29 companies in the world currently have more money than the US Treasury. The "rich enemy" company also includes four state-owned banks in China.

The national debt crisis even affects the official business activities of US government officials.

Xu Mingqi, deputy director of the Institute of world economics, Shanghai Academy of Social Sciences, told the Southern Weekend reporter: "last month, two officials of the State Department made a prior appointment to visit Shanghai, and talked to me about China's" 12th Five-Year plan ". Suddenly, they called to say that they were not coming because the US government had no money and the government had to cut costs and not come. Later, because of the adjustment of the temporary plan, the US government could borrow money from the pension fund, and after a while, the telephone came to say that it could come, and the government could operate again.

　 Donkey and elephant fight

After playing the game several times, market participants certainly do not believe that the United States will really default, but people have already lost patience with this long drawn out crisis.

The Washington Post reported that Obama's Twitter account (@BarackObama) sent hundreds of information about debts. 30 thousand people were dissatisfied with the behavior of the screen, and Obama's attention was removed. A netizen commented: "Mr. President, there is no need to publish spam here."

The dispute over the US debt ceiling is not the first time in the United States. It is essentially a political game between the two parties in the United States.

Obama's Democratic Party values welfare spending, advocates raising taxes and holds a majority of seats in the Senate, while Republicans value low tax environment, advocate spending cuts and hold majority seats in the house of Representatives. Obama has already submitted a $3 trillion and 700 billion long-term deficit reduction plan, including tax increases and cuts in social welfare spending, but the Republican Party is opposed to any form of tax increase.

In terms of raising the size of the debt ceiling, Obama tends to have a one-off plan and suggests that the US debt ceiling be raised by US $2 trillion and 500 billion from August to the end of 2012, so that once and for all, it will clear the way for its 2012 general election. The Republican party only praised the small cap to raise the debt ceiling to deal with the default. Then the debt ceiling continued to be a threat, and the Democratic Party put pressure on the adjustment of the tax policy.

This situation is exactly the same as that spring of 32 years ago. On that occasion, the US government had a "technical" default. The Republicans and Democrats also played a "uncompromising" brave game in Congress on the debt ceiling issue, when the Carter government had to break the ceiling of $830 billion.

Finally, until the finance minister W Michael Blumenthal warned that the United States had only a few hours left for its first breach in history, the two parties finally reached a deadline agreement.

Because the two parties reached an agreement almost at the last minute, coupled with the huge paperwork of a large number of investors demanding repayment of treasury bonds, eventually resulted in a technical default on thousands of US Treasury bonds that expired in April 1979 and May.

Even at that time, the delayed payment of $120 million was very small. Some investors filed a class action lawsuit against the US government and finally obtained compensation for interest losses. So no matter what the US Treasury Department did at that time or now, it did not acknowledge that there was actually a breach of the US Treasury bonds. They believed that the debt was simply delayed because of the internal block.

Since then, the situation has been staged on the eve of Clinton's re-election in 1995. Clinton's toughness led to the closure of some federal government, and about 1 million government employees went home to rest.

Of course, the final result is that Clinton not only resolved the debt problem, but also won a second term.

After that, this time, market participants certainly do not believe that the United States will really default.

However, people still have no patience with this long drawn out debt crisis. Last Thursday, the Washington Post reported that Obama's Twitter account has sent hundreds of information about debts. (@BarackObama) 30 thousand people were dissatisfied with the behavior of the screen, and Obama's attention was removed.

"Mr. President, there is no need to publish spam here." One netizen commented.

To cope with the potential financial turmoil, Wall Street bank has been hoarding cash and withdrawing money from money market funds. Overnight repo rate has soared, showing that banks are unwilling to borrow money. Money market mutual funds also sell large quantities of assets to deal with possible redemptions. The Federal Reserve and the Treasury are also preparing emergency measures to deal with possible default.

　 The black swan did not fly away.

In a report by Deutsche Bank, we are now at a unique and dangerous moment.

In August 1st, though the alarm for breach of contract was lifted, the "black swan" did not really fly away.

14 trillion what are the holders of US debt?

The largest holder is the US government itself, including the Federal Reserve. If the default, Republican presidential candidate Ron Paul even contributed a crazy idea: the Federal Reserve could burn up its own $1 trillion and 600 billion treasury bonds.

The second is foreign institutions, mainly China, Japan and so on. The Wall Street Journal reported that a country like China would face a "dollar trap": if China wants to sell huge US Treasury bonds, the yuan will fall against the US dollar.

However, if the default really happens, the biggest loss is the credit of the United States.

The United States is the best borrower and will never default. This concept has gained popularity in the global financial system for decades. Investors are convinced that they can compare all the bonds with us index treasury bonds, and the interest rate of US Treasury bonds as a "risk-free interest rate" is an important cornerstone of the financial market.

The next step is whether the rating agencies will lower the US AAA rating.

Previously, standard & Poor's has said that if the United States wants to maintain its AAA rating, the deficit reduction in the next ten years should reach the scale of US $4 trillion. In Obama's agreement with congressional leaders, the deficit was only $2 trillion and 400 billion.

On August 2nd, Moodie, the rating agency, confirmed on Tuesday that the US's AAA sovereign rating will be maintained on the basis of the US raised the statutory debt ceiling before August 2nd, but the rating outlook remains negative, which will continue to exert pressure on the government to achieve long-term fiscal consolidation.

This means that the United States is still likely to be demoted in 12 to 18 months.

However, as early as in July 25th, Jim Rogers, a well-known investor, accepted the interview with the Wall Street journal, saying: "the United States has lost its status as a AAA. Who cares what Moodie says?"

Speaking of US Treasury bond investment, Rodgers said, "I will not lend the US dollars to the US for 30 years at any rate of 3%, 4%, 5% or whatever you can list. In June 10th, I was shorting it (US Treasury bonds). As we have said, I'm shorting the US bond market. "

But even if the default does not happen, the outlook is not optimistic.

On the one hand, the government's sharp cuts in the opening of the economy will probably make the US economy enter the two recession. Because Keynes theory suggests that fiscal tightening will deteriorate rather than boost economic performance.

In 2008, Paul Krugman, the winner of the Nobel prize in economics, wrote in a column, "cutting government spending in the economic downturn will only aggravate the situation. Borrowing rates are now very low, and spending cuts will not help reduce interest payments in the future. A weaker economy will lead to a decline in revenues in the future.

To those who hold this view, reducing expenditure is like medieval doctors who treat blood by giving blood to patients.

In fact, the economic recovery in the United States has been very fragile. In the first half of the year, the US economy has slowed sharply and its growth rate has reached a two-year low.

Data released last Friday showed that the US GDP grew by only 1.3% in the second quarter, while the GDP growth in the first quarter dropped from 1.9% to 0.4%.

David Walker, former US auditor general, said that in less than three years, the United States is now Greece.

On the other hand, on the other hand, it is widely expected that the increase in the debt ceiling means that US debt will continue to increase, and that the US will probably use the position of the US dollar as the world currency to activate the banknote printing machine and transfer the debt to the rest of the world.

The situation in the world economy is now everywhere: smoke burning in Europe and Japan's debts. As a new engine of the world economy, China is also facing a high inflation threat. If the United States further print money and increase liquidity, it will bring new dangers to the global economy.

In a report two months ago, Deutsche Bank pointed out that in the medium to long term, we are still in the early stage of the global sovereign debt crisis. The current sovereign debt crisis has not yet led to a deep recession, so the future crisis will become broader. Now we are at a unique and dangerous moment.